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Industrial competition dynamics >

Overview and description of publications

Overview of the research program

Competition involves a process. Firms enter new markets trying to supplant others. Firms that exit are those who fail to provide customers with competitive products and prices. Firms grow by taking market share from others who lose it. Some firms take over others. This dynamic process drives productivity and removes excess profits.

To understand this process requires special longitudinal databases that tend to reside within statistical agencies. There are several such databases within Statistics Canada. Using these databases, the research program pioneered new studies that allowed a better understanding of the processes at work. As such, these studies provide new insights into the health of the Canadian industrial system.

This compendium of studies provides a comprehensive body of evidence on the nature of the dynamic change that takes place in firm populations as a result of competition. This culminated in the Cambridge University Press monograph— The Dynamics of Industrial Competition: A North American Perspective. Subsequent studies have expanded our knowledge.

Before this work, the standard descriptions contained in textbooks of industry dynamics focused on measures that are derived from static firm populations—and generally describe competition as a state of affairs rather than a process. An example of the latter tendency occurs when concentration ratios are used to measure the likelihood that anti-competitive activities would take place within industries, since concentration measures are static measures of firm populations, not dynamic measures of the amount of change that is taking place within these populations.

The work on the dynamics of competition that has been carried out at Statistics Canada has challenged existing preconceptions of the competitive process that used measures like market concentration as a statistical summary of the state of competition in an industry. These studies of dynamics have shown that entry and exit are large; large firms tend to lose market share and decline; small firms tend to gain market share and grow. There is a large amount of firm turnover. Moreover, it showed that the old statistics (concentration ratios) were not good proxies for the amount of competitive turnover that takes place in an industry.

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Overall intra-industry structural change

The earliest work on firm dynamics involved a special study that was done to examine the amount of firm and worker turnover taking place in the economy. A joint product of the Economic Council of Canada and Statistics Canada, this monograph used a special longitudinal file on firms that was based on payroll accounts and record of employment data that must be filed with the government by a firm when there is a worker separation. The firm-based file was used to examine the amount of jobs transferred from declining firms to growing firms as a result of firm growth and decline. The worker separations data were used to examine the amount of worker turnover as employees leave companies and then are rehired. The study describes the differences in the job turnover rates by industry and by size class. Worker separations are divided into involuntary and voluntary components in the study.

On an annual basis, the sum of job growth and decline is over ten percent of the total number of jobs. But the percentage of workers that turn over annually is even larger—approximately 20% annually in the 1970s and 1980s. The study points out the large size of the annual churn rate, whether measured by job turnover or worker turnover, and the size of the social safety net that is required to handle this.

Baldwin, J.R. and P.K. Gorecki. 1990. Structural Change and the Adjustment Process: Perspectives on Firm Growth and Worker Turnover. Economic Council of Canada. Ottawa: Minister of Supply and Services.

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An overview of firm dynamics

Relying on comprehensive firm and plant data from the Census of Manufactures at Statistics Canada and a reliable set of plant and firm identifiers that allowed for the creation of longitudinal panels that track the same producer over time, the combined set of studies of the dynamics of competition in the Canadian manufacturing sector overcome many of the problems that have plagued empirical studies of firm turnover. In doing so, they also provide new insights into the dynamics of the market system.

An overview of the work on firm dynamics is provided in the book:

Baldwin, J.R. 1995. The Dynamics of Industrial Competition: A North American Perspective. Cambridge: Cambridge University Press.

The conclusions that emerge from this study are:

Greenfield entry (the entry of new firms via the building of new plants) and closedown exit (the exit of firms via the closedown of plants) have a significant cumulative impact when measured over a decade. While the immediate impact is primarily on smaller firms, the process is not unimportant in a quantitative sense. This is not a phenomenon that warrants the description of churning at the margin. Firms may start small and many may die during the maturation process, but the effect of successive cohorts cumulates to meaningful levels. Greenfield firms that entered between 1970 and 1979 accounted for, on average, 16.1 per cent of 1979 industry shipments; in 1970, firms that were to close by 1979 accounted for 18.2 per cent of industry shipments. Entry cannot be dismissed as being quantitatively unimportant, as some previous studies have done.
In evaluating the extent to which firms turn over due to entry, the effect of entry via acquisition must not be ignored. Over the decade of the 1970s, its cumulative effect was just about the same as for greenfield entry. Establishments that were acquired by entrants to a 4-digit industry between 1970 and 1979 accounted for 11.8 per cent of shipments in 1979 on average; establishments that were divested over the same period by exiting firms accounted for some 11.8 per cent of 1970 shipments on average.

What is equally important, acquisition entry brings new participants into parts of the firm-size distribution and into industries where greenfield entry is less extensive. It is the joint effect of the two processes that has to be considered in evaluating the intensity of entry. The quantitative importance of acquisition entry emphasizes the importance of the market for corporate control and the problems that will arise if these markets are unduly hindered.
Turnover also takes place within the continuing firm population. There is a continuous growth and decline process that results in small firms displacing large firms. Large firms are not immune to change.

This has important implications for a competition policy that is aimed at restraining the largest firms. The largest firms in an industry are, on average, already in decline because of the inexorable process that replaces the old with the new. The rapidity of that process differs industry by industry. These differences should form the basis for summary statistics that encapsulate rigidities. Moreover the direction of the process militates against a policy that unduly treats concentration ratios as indicative of the degree to which market power is long lasting.
While each of the turnover processes examined—greenfield entry and closedown exit, acquisition entry and divestiture exit, and continuing plant turnover—is respectable by itself, it is the joint effect of the three that is striking. In an average industry, almost 44 per cent of all market share that could be shifted was transferred over the decade of the 1970s. By itself, this testifies to the intensity of competition.
The importance of turnover does not have to be evaluated on the basis of size alone. Gains in productivity are associated with substantial shifts in market share. Greenfield entrants are more productive than the exiting plant that they replace. Continuing plants that gain market share become substantially more productive than continuing plants in decline. Greenfield entry contributed about 20 per cent of the total growth in productivity over the decade of the 1970s; continuing firm plant births, about 7 per cent; and the replacement process within continuing plants, some 21 per cent.

Turnover makes a substantial contribution to productivity. This reinforces the admonitions of those who have argued that a dynamic population of firms is the key to industrial success and that performance should be measured in terms of progress—not the static concept of inter-industry profitability differentials. The evidence developed in the Canadian studies clearly demonstrates the linkage between turnover and progress.
The evidence on the link between various aspects of turnover shows that they perform different functions. They improve productivity; they increase industry efficiency; and they serve an equilibrating function for inter-industry profit differentials.
The effects of the various turnover components on the different aspects of performance are not the same.

Greenfield entry has a particularly strong effect on progress. However, the effects of entry emerge only in the long run and studies that focus on the short-run will underestimate the impact of entry. The newborn require time to reach adolescence and only begin to make a substantial contribution when they become young adults.

Merger entry has greater short-run effects because it is used essentially to rescue a mature firm that has temporarily gone astray. The long-run effects are less because there is less room for improvement for an adult that has already proved its mettle. Improvement comes here from returning slightly subnormal performance to the mean. Nevertheless, it has a substantial overall effect because the affected businesses are large.

It is plant turnover in the continuing population that has strong effects everywhere. It makes substantial contributions to productivity growth, to efficiency, and to the profit equilibration process.
The use of concentration as a summary statistic to represent the intensity of competition should be reevaluated. It is not strongly correlated with many of the mobility measures except for greenfield entry and exit. Indeed, it is as much determined by mobility, as it is a determining factor of the amount of mobility. This confirms the importance of treating structure as endogenous.
The finding that there is a "real" effect of mergers shows that mergers, like entrants, do not involve a meaningless churning of resources. Greenfield entrants bring new resources into an industry. Mergers bring in new actors. Both renew the industry; but they do so in different ways.

Additional references may be found below.

For an overview, see also Baldwin, J.R. 1993. “New Perspectives on Market Dynamics.” Canadian Business Economics. Fall: 18-27.

For individual studies that delve into specific issues, see

Baldwin, J.R. 1991b. Industry Efficiency and Plant Turnover in the Canadian Manufacturing Sector. Analytical Studies Research Paper Series 11F0019 No. 37. Analytical Studies Branch. Ottawa: Statistics Canada. Also in Industrial Efficiency in Six Nations. Edited by R.E. Caves. Cambridge, MA: M.I.T. Press, 1992.

Baldwin, J.R. and R.E. Caves. 1991. Foreign Multinational Enterprises and Merger Activity. Analytical Studies Research Paper Series 11F0019 No. 42. Analytical Studies Branch. Ottawa: Statistics Canada. Also in Corporate Globalization through Mergers and Acquisitions. Edited by L. Waverman. Ottawa: Investment Canada and University of Calgary. 1991.

Baldwin, J.R. and P.K. Gorecki. 1986a. “The Relationship Between Trade and Tariff Patterns and the Efficiency of the Canadian Manufacturing Sector in the 1970s. A Summary.” In G. Whalley, Research Coordinator. Canada-United States Free Trade, Volume 11 of the research series of the Royal Commission on the Economic Union and Development Prospects for Canada. Toronto: University of Toronto Press.

Baldwin, J.R. and P.K. Gorecki. 1986b. “Canada/U.S. Productivity Differences in the Manufacturing Sector: 1970-79.” Chapter 5 in D.G. McFetridge, Research Coordinator. Canadian Industry in Transition, Volume 2 of the research series of the Royal Commission on the Economic Union and Development Prospects for Canada. Toronto: University of Toronto Press.

Baldwin, J.R. and P.K. Gorecki. 1986c. The Role of Scale in Canada/U.S. Productivity Differences in the Canadian Manufacturing Sector in the 1970s. Volume 6 of the research series of the Royal Commission on the Economic Union and Development Prospects for Canada. Toronto: University of Toronto Press.

Baldwin, J.R. and P.K. Gorecki. 1987. “Plant Creation Versus Plant Acquisition.” International Journal of Industrial Organization 5: 25-41.

Baldwin, J.R. and P.K. Gorecki. 1989. “Measuring the Dynamics of Market Structure.” Annales d'Economie et de Statistique 15/16 (July/December): 316-32.

Baldwin, J.R. and P.K. Gorecki. 1990a. “Firm Entry and Exit in the Canadian Manufacturing Sector.” Canadian Journal of Economics (May 1991): 300-23.

Baldwin, J.R. and P.K. Gorecki. 1990b. Intra-Industry Mobility in the Canadian Manufacturing Sector. Analytical Studies Research Paper Series 11F0019 No. 23b. Analytical Studies Branch. Ottawa: Statistics Canada.

Baldwin, J.R. and P.K. Gorecki. 1990c. Measuring Entry and Exit to the Canadian Manufacturing Sector Using Longitudinal Data: Methodology. Analytical Studies Research Paper Series 11F0019 No. 23c. Analytical Studies Branch. Ottawa: Statistics Canada. Partially reprinted in Analysis of Data in Time. Edited by A.C. Singh. Proceedings of a Conference sponsored by Statistics Canada, Carleton and Ottawa University, 1990.

Baldwin, J.R. and P.K. Gorecki. 1990d. The Contribution of the Competitive Process to Productivity Growth: the role of firm and plant turnover. Analytical Studies Research Paper Series 11F0019 No. 23d. Analytical Studies Branch. Ottawa: Statistics Canada. Partially reproduced as "Entry, Exit and Productivity Growth." In Entry and Market Contestability: An International Comparison. Edited by P. Geroski and J. Schwalbach. Oxford: Basil Blackwell, 1991.

Baldwin, J.R. and P.K. Gorecki. 1990e. Mergers and the Competitive Process. Analytical Studies Research Paper Series 11F0019 No. 23e. Analytical Studies Branch. Ottawa: Statistics Canada. Partially reproduced as "Mergers Placed in the Context of Firm Turnover." In Proceedings of the Census Bureau Fifth Annual Research Conference. Washington, D.C.: Bureau of the Census. 1990.

Baldwin, J.R. and P.K. Gorecki. 1990f. Concentration Statistics as Predictors of the Intensity of Competition. Analytical Studies Research Paper Series 11F0019 No. 23g. Analytical Studies Branch. Ottawa: Statistics Canada.

Baldwin, J.R. and P.K. Gorecki. 1990g. “Firm Turnover and Market Structure: The Use of Concentration Ratios as a Misleading Practice.” In Competition Policy at the Centenary. Edited by R.S. Khemani and W.S. Stanbury. Halifax, N.S.: Institute for Research in Public Policy. 1991.

Baldwin, J.R. and P.K. Gorecki. 1990h. The Relationship Between Mobility and Concentration for the Canadian Manufacturing Sector. Analytical Studies Research Paper Series 11F0019 No. 23h. Analytical Studies Branch. Ottawa: Statistics Canada.

Baldwin, J.R. and P.K. Gorecki. 1991. Distinguishing Characteristics of Foreign High Technology Acquisitions in Canada's Manufacturing Sector. Analytical Studies Research Paper Series 11F0019 No. 37. Analytical Studies Branch. Ottawa: Statistics Canada. Partially reprinted in Foreign Investment, Technology, and Growth. edited by D. McFetridge. Ottawa: Investment Canada and University of Calgary. 1991.

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The importance of entry to Canadian manufacturing with an appendix on measurement issues

Understanding the importance of the entry process to the Canadian economy involves measuring the amount of entry. But measuring this is not straightforward. The administrative and survey databases that are used were not initially designed for this purpose.

This paper examines the issue of the accuracy of measurement of entry. It summarizes the information that we have on the amount of entry in Canada by looking at three different databases and compares the estimates that are derived for each. In doing so, it focuses on the robustness of the answers that are derived when different databases are used to measure entry.

The paper was prepared for an OECD project that has tried to estimate differences in entry rates across countries as part of a study that tries to assess whether some countries are more ‘dynamic’ than others. The background studies for different countries each use micro-economic databases that have been compiled in different ways. Interpretation of the cross-country differences that have emerged is difficult unless methodological issues regarding how entry is measured are addressed. Without an understanding of the extent to which different databases produce different results, international comparisons are difficult to evaluate.

Since there was more than one reliable database that can be used to estimate entry in Canada, the OECD asked that Canada prepare a paper that examines how measured entry rates vary across different Canadian databases. By examining the difference in entry rates produced by these databases, we provide an estimate of the range or confidence interval that should be used in evaluating whether there are real differences in measured entry rates across countries. Guidance is also offered as to the questions that should be asked about the data bases used by researchers who conduct international studies. Finally, suggestions are made as to areas of comparison on which international studies should focus.

Baldwin, J.R., D. Beckstead and A. Girard. 2002. The Importance of Entry to Canadian Manufacturing with an Appendix on Measurement Issues. Analytical Studies Research Paper Series 11F0019MIE2002189. Analytical Studies Branch. Ottawa: Statistics Canada.

Baldwin, J.R., D. Beckstead and A. Girard. 2002. The Importance of Entry to Canadian Manufacturing. STI Working Paper (2002/3) Directorate for Science, Technology and Industry. Paris: Organization for Economic Cooperation and Development.

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The growth of entrants

Ultimately the health of an economy depends not only on having new firms entering existing markets to produce new goods, but also on their ability to grow and increase their productivity. Being able to grow small new dynamic firms to a large size is one way that an economy produces large dynamic producers.

To better understand this, research has examined the growth process of a cohort of entrants (a group of entrants who were all born in the same year). A cohort of entrants proceeds through time with some firms exiting, but with others growing larger to become middle-sized and then large. Progress in the cohort as a whole can occur either because the weaker and less productive entrants are culled from the cohort or because the surviving entrants make substantial gains. Knowing which of these occurs enables us to better evaluate the ability of new forms to transform the population.

The first paper examines the maturation process of firms that enter the manufacturing sector by constructing a new plant over the period 1971-1989. It investigates the extent to which improvements in the performance of any entry cohort are the result of a selection process that culls out the most inefficient entrants or of a learning process that allows survivors to improve their performance relative to incumbent firms. Both selection and evolutionary learning are found to affect post-entry performance, but selection per se is a more important contributor to the overall growth of a cohort.

Baldwin, J.R. and M. Rafiquzzaman. 1994. Selection Versus Evolutionary Adaptation: Learning and Post-entry Performance. Analytical Studies Research Paper Series 11F0019MIE1994072. Analytical Studies Branch. Ottawa: Statistics Canada. Also published in International Journal of Industrial Organization. 13: 501-522.

The second paper replicates some of the results of the earlier paper for a longer period of time. It investigates whether the productivity growth of a cohort comes mainly from the culling of the most inefficient entrants. But it also investigates how the productivity growth that occurs in surviving entrants compares to incumbent surviving plants. It finds that the surviving entrants do have positive productivity growth; but that it is less than the growth of incumbents. Once more this suggests that entrants have a difficult initial phase. They are much more likely to fail; they are also less likely to have the same type of productivity growth in their initial years as are more mature firms.

Baldwin, J.R. and W. Gu. 2003. Plant Turnover and Productivity Growth in Canadian Manufacturing. Analytical Studies Research Paper Series 11F0019MIE2003193. Analytical Studies Branch. Ottawa: Statistics Canada.

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Changes in the impact of turnover on productivity over time

In The Dynamics of Industrial Competition: A North American Perspective, we demonstrated that firm turnover makes a substantial contribution to productivity growth. The more productive firms gain market share at the expense of the less productive. As a result, average productivity in the population increases.

A second research project examined whether this changed between the 1970s and 1980s. The interest in this question stemmed from the fact that productivity growth declined over this time period.

Therefore, a research project examined how much of the productivity slowdown that occurred in the 1980s may be attributed to a basic change in the nature of the competitive process and whether there has been a reduction in the extent to which the turnover process contributes to productivity growth.

The paper finds that a fundamental change occurred in the dynamics of the population over this period. In particular, new entrants tended to decline in terms of their productivity. New smaller firms did not contribute to productivity growth as they once did.

Baldwin, J.R. 1996. Were Small Producers the Engines of Growth in the Canadian Manufacturing Sector in the 1980s? Analytical Studies Research Paper Series 11F0019MIE1996088. Analytical Studies Branch. Ottawa: Statistics Canada.

Baldwin, J.R. 1996. "Productivity Growth, Plant Turnover and Restructuring in the Canadian Manufacturing Sector," In Sources of Productivity Growth. Edited by D. Mayes. Cambridge: Cambridge University Press.

More recently, a research study has examined differences in the impact of different types of entry—new plants of greenfield entry versus new plants of incumbents, domestic versus foreign-owned plants; single versus multiple plants. It also asks whether the impact of these different forms of entry have changed over time. It finds that overall entry (the creation of new plants) has made about the same contribution to overall productivity in each of the last three decades. But the portion of the total contribution of entry that originates in foreign plants or multi-establishment units has increased. Conversely, the contribution that is made by small, single establishment domestic plants has fallen.

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Exit dynamics

Our work on firm dynamics has shown that entry and exit are an important component of firm turnover. There is a connection between the two if most entrants fail quickly. Understanding the magnitude of this process and the factors that affect the rate of death of entrants is important to industrial strategies that are aimed at helping new firms avoid failure.

A major study investigated failure rates of new firms for both goods and service industries to derive survival and hazard rates of entrants. It found that this group as a whole has very low survival rates, thereby emphasizing the importance of exits in this population. Only one in five firms survives beyond its eighth birthday. The median age of the sample was only about three years. While there were large differences in the initial hazard rates across industries, over ten years these differences were substantially reduced.

The study found that exit is part of an experimentation process. Where the costs of experimentation were high, entry is larger and exit from any group of entrants is higher. New entrepreneurs use the entry process to assess their competence. This means that high exit rates are not so much a manifestation of market imperfections associated with competition but with rational choices that are affected by the level of experimentation costs.

The study also examined the determinants of the survival of entrants using multivariate analysis. Failure rates are highest for the younger, smaller firms. The study also examined interprovincial differences in the success rate of new firms with an eye to deciding whether certain jurisdictions are more favourable to new entrepreneurs. We found that there is no easy way to rank provinces by the degree of success of new firms since the ranking differs over time. The failure rate of entrants at their first birthday is lower in Ontario than elsewhere; but the results are reversed for five year-olds—once again suggesting that entry and exit adjust to the long-run costs of doing business.

Baldwin, J.R., L. Bian, R. Dupuy and G. Gellatly. 2000. Failure Rates for New Canadian Firms: New Perspectives on Entry and Exit. Catalogue No. 61-526-XIE. Analytical Studies Branch. Ottawa: Statistics Canada.

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Patterns of diversification

The papers in this series were directed at the following questions:

What is the nature of corporate diversification in Canada? Does it lead to the concentration of economic activity in closely related industries? How important is cross-industry diversification and is there evidence that diversification extends firms primarily across related or unrelated industries?
Has there been a long-term trend to more specialization on the part of firms? Have plants tended to increase or decrease their rate of product-line specialization? How do these changes relate to changing trade patterns?

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Patterns of corporate diversification in Canada

Large businesses continue to play a major role in shaping Canada’s economic landscape. Takeovers and mergers by conglomerate firms attract considerable public attention. Yet there is little general information on the extent to which this organizational form is important in the Canadian economy. Our research in this area examines the breadth of Canada’s most sophisticated firms—companies whose operations span different industries. While these firms comprise less than 1% of all Canadian businesses, they generate over one-third of all business income and employ about one-quarter of the workforce.

This research study investigates how these firms diversify—whether they expand their operations into different industries in support of a core business line (so-called vertical strategies), or alternatively, whether they establish operations in different industries as a means of achieving a more diverse set of business objectives. The analysis also asks whether diversification patterns within these firms “mirror” important inter-industry trade flows within the economy—trade flows that signal the presence of vertical diversification strategies. This study brings new empirical evidence to the longstanding debate over whether vertical diversification strategies play a major role within the economy.

The study finds that most firms are far more likely to expand their reach into “unrelated” industries—that is, those with no obvious vertical relationship. This suggests that corporate diversification is more often about expanding the frontiers of the firm into new areas than about supporting the firm’s traditional business line.

Multivariate analysis also indicated that there was no obvious generalization that could be made about the patterns of the diversification that took place into unrelated industries. The study found that the degree to which firms in an industry diversified into other industries was not closely related to industry characteristics like concentration, R&D, and trade flows that theoretical research has suggested should be associated with firm diversification.

Baldwin, J.R., D. Beckstead, G. Gellatly and A. Peters. 2000. Patterns of Corporate Diversification in Canada: An Empirical Analysis. Analytical Studies Research Paper Series 11F0019MIE2000150. Analytical Studies Branch. Ottawa: Statistics Canada.

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Increases in specialization of Canadian manufacturing firms and plants (1973-1997)

Economies of scale that are associated with larger plants and longer production runs of specific product lines reduce unit costs and improve a plant’s ability to compete in world markets. Proponents of the move to free trade argued that the change in trade regime would benefit Canada because it would permit Canadian plants and firms to exploit scale economies more fully. Little evidence has been provided that these adjustments have been made. And the few studies that have examined this issue have focused on whether plant scale increased and have ignored changes in plant specialization that would have increased the length of the production run. To overcome this deficiency, this paper examines changes that have occurred in plant specialization.

This paper studies changes in the specialization of firms and plants since the early 1970s in the Canadian manufacturing sector. It finds that there has been a general increase in specialization of both firms and plants. Firms have been continuously reducing the span of industries in which they operate, particularly when the industries are unrelated. Commodity specialization has also occurred at the plant level; however, in contrast to industry specialization, commodity specialization emerged late in the period, around the time of implementation of the Free Trade Agreement between Canada and the United States. Plant specialization increased most in those plants that moved most strongly into export markets.

The paper also notes a considerably different response of foreign and domestic plants to changes in export intensity. Foreign plants were less specialized before the FTA than domestic plants, but became more specialized afterwards.

Baldwin, J.R., D. Beckstead and R. Caves. 2002. Changes in the Diversification of Canadian Manufacturing Firms and Plants (1973-1997): A Move to Specialization. Analytical Studies Research Paper Series 11F0019MIE2002179. Analytical Studies Branch. Ottawa: Statistics Canada.

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Future research

The effects of shifts in market share across incumbents

Present research is focusing on the importance of market-share turnover on productivity growth and how it has changed over the last thirty years.

Trade and dynamics

A set of studies is examining the changes that occurred post FTA and NAFTA that will test to see whether there have been any changes in the amount of turnover in those industries most affected by the trade liberalization that Canada experienced in the 1990s.

Increased trade liberalization is seen to have an impact on industrial structure—through entry and exit or changes in scale. Both should enhance productivity. The two research projects discussed previously examined the relationship between the degree of trade liberalization and changes in structure. However, there are other routes through which exposure to trade might be translated into productivity gains.

Trade may lead to more information about technologies or business practices. In order to investigate whether there are direct links between exporting activity and productivity, a microeconomic panel data set of Canadian plants was developed that followed plants from 1973 through to the 1990s. Productivity (output per worker) and export intensity of each plant was measured—along with other plant characteristics like size, age, nationality, and capital intensity.

Two questions were posed. First, were there particular plant characteristics that led plants to enter export markets? Second, after entry to export markets, did these plants increase their productivity relative to their compatriots?

The paper found that a selection process to determine who entered export markets was at work. In particular, more productive plants were generally more likely to become exporters. Moreover, after these plants became exporters, they increased their productivity relative to those that did not enter export markets. These results suggest that there are real productivity gains associated with entering export markets. It is also the case that plants that increased their export intensity also increased their relative productivity.

Baldwin, J.R. and W. Gu. 2003. Participation in Export Markets and Productivity Performance in Canadian Manufacturing. Economic Analysis Research Paper Series 11F0027MIE2003011. Analytical Studies Branch. Ottawa: Statistics Canada.

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